Government buys on price, corporates on relationship

According to the latest survey of 500 of Australia's largest corporations, price is declining in importance compared to the value add delivered by suppliers. This stands in stark contrast to an equivalent survey of government agencies, which persist with "outdated" procurement policies.

The Corporate Report, a quarterly survey conducted by research company East and Partners, has found corporate users continue to look for real added value and commitment in their supply relationships. Traditional issues, such as suppliers performing to contract, price and implementation specs, are assumed, the report says, and are no longer a big differentiator.

East and Partners also conducts The Canberra Report and principal analyst Paul Dowling said the difference between corporate purchasing and government purchasing is widening.

The Corporate Report asks companies to rank 31 relationship and 31 performance factors from least important to most important (see sidebar). Price was ranked as the seventh least important factor for large corporates, while it ranked as the most important factor for Federal Government users.

"This is just another example of public sector buying that's 20 years out of date," said Dowling. "By applying very simplistic purchasing principles [agencies] run a high risk of not having their investments supported."

It is the second such report and Dowling said the trend emerging is that suppliers (predominantly vendors) that scored well in the first report have extended their lead in difficult market conditions.

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